What is the break-even price and what is the shut-down price

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Joe Brown's dairy operates in a perfectly competitive marketplace. Joe's machinery costs $500 per day and is the only fixed input. His variable costs are comprised of the wages paid to the few workers he employs at the dairy and the grain he feeds to his dairy cows. The variable cost associated with each level of output is given in the accompanying table. Gallons of Milk Variable Cost 0 - 1000 $ 2,100 2000 $ 2,200 3000 $ 3,380 4000 $ 3,600 5000 $ 3,900 a. Calculate the total cost, the average variable cost, the average total cost, and the marginal cost for each quantity of output. Gallons of Milk FC VC TC MC AVC ATC 0 $500 - 0 - - - 1000 500 $ 2,100 2600 2.60 2.10 2.60 2000 500 $ 2,200 2700 1.35 1.10 1.35 3000 500 $ 3,380 3880 1.02 1.13 1.02 4000 500 $ 3,600 4100 1.03 .90 1.03 5000 500 $ 3,900 4400 .88 .78 .88 b. What is the break-even price? c. What is the shut-down price?

Reference no: EM13219613

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